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New UK trade and tariff regime outlined in bill.

 The Taxation (Cross-Border Trade) Bill was issued on 21 November. It creates a new UK customs regime, based on but independent of EU law, with a prevailing focus on continuity for UK business. However, as the bill legislates for multiple scenarios – ranging from unfettered trade access to the EU to no trade deal at all – it is difficult to see how that continuity can be achieved if the EU imposes the normal third-country tariffs after Brexit.

The bill also provides for EU imports and exports to be subject to customs checks.

 Government post-Brexit powers
The government may diverge from EU law after a bilateral deal with the EU is agreed to ensure any divergence is compliant with the terms of the deal. The bill also delegates powers to the government to:

  • alter the administration, collection and enforcement of customs duty
  • alter primary legislation
  • use secondary legislation to implement trade agreements
  • form a new customs union with any jurisdiction or territories – although any such union must be approved by the Commons.

Tariffs and duties
The new cross-border trade regime can:

  • charge tariffs on EU imports, with current special procedures remaining in place for all imports
  • reclassify goods and related customs duty
  • allow for new UK tariffs or the striking of preferential deals
  • set rates of customs duty and goods quotas
  • create customs unions with other territories
  • facilitate collection of customs declarations by HMRC.

Tariff rates
The Treasury will set the customs tariff. For goods, this will be a percentage on the value of the goods, a fixed fee per specified quantity, or a combination of both.

Preferential rates
The bill gives the government the power to negotiate its own preferential rates with other jurisdictions. It also allows the chancellor both to set unilateral preferential rates for developing countries (with power to choose reduced or removed tariffs) and to impose increased tariffs as a retaliatory measure in international disputes.

Quotas
Where quotas are set, importers may need to apply for a licence to benefit from duty reductions; they may also have to pay a licence fee.

Customs agents
Importers may appoint customs agents, and there is a possibility that these agents will have to be approved by HMRC.

VAT
EU acquisition VAT will be abolished (amending the 1994 VAT Act) in favour of import VAT for all goods in.

The bill gives the government the power to make agreements with the EU on the movement of goods and services still in transit during exit, to deal with VAT related to EU trade, and to negotiate the level of information shared with the EU (relating to tax evasion/avoidance).

If a negotiated trade deal outcome is reached with the EU, the government will legislate to implement the necessary regulation on the basis of the powers delegated in the Taxation (Cross-Border Trade) Bill. The Treasury will have the power to exclude or modify EU law via statutory instrument with negative procedure (ie both houses of parliament agree without debate).

The European Court of Justice for EU case law relating to VAT will cease to have effect after withdrawal.

Article from ACCA In Practice